To get around the shortage of domestic coal, Budget 2013-14 is expected to announce a far reaching change to make private sector produce more of the mineral.

Companies with coal blocks will be allowed to sell their surplus coal under a public-private-partnership model in the markets instead of selling only to Coal India.

This will need an amendment to the Coal Mines (Nationalisation) Act, 1973, which the government will propose.

The plan was broached by the coal ministry to give a fillip to the sector. It has apparently been accepted by the finance ministry and may figure in the upcoming Budget.

Under the Coal Mines (Nationalisation) Act, all coal produced in the country except those produced by captive mines have to be sold only to designated end users while any surplus has to be sold to Coal India. The process has made mining for coal unremunerative as the public sector company is often unable to pick up the produce from the mines which pile up for years.

In 2012, the government got embrolied in a major controversy as it was found that of the 192 mines allocated over the years to private parties since 1993, only 29 had come into production.

The proposal takes forward a recommendation made by Planning Commission member BK Chaturvedi to the Prime Minister’s Office. He had suggested that in view of short supply of coal, the captive coal block holders should be given an incentive to sell their surplus production as a temporary measure to help lessen imports. The government, it would seem, is planning to make this a long-term arrangment, now.

While the details will be worked out later, the plan might also cover cases like the ultra-mega power projects where companies alloted excess coal for instance, will be able to sell it to others under arms-length pricing.

According to Commission figures, domestic coal production could reach 785 million tonnes by 2016-17, the terminal year of the 12th five year plan. Of this, more than a tenth will be from the captive blocks. Production from these blocks have been disappointing during the 11th Plan.

Checking shortage

* Under the Coal Mines (Nationalisation) Act, all coal produced in the country except those produced by captive mines have to be sold only to designated end users while any surplus has to be sold to Coal India